Last Thursday, when I received an email from Comcast PR with a release attached, announcing that Hulu + Live TV would now be available for Comcast’s broadband and Flex users, I did a double-take.
Of course, it is no secret that Comcast has long emphasized its broadband business over its traditional pay-TV business. Between a benign competitive environment and most recently the Covid catalyst, Comcast had soared to 28.8 million residential broadband subscribers at the end of Q1 ’21, up another 448K, while residential video subscribers fell by 404K to 18.6 million. The 10.2 million difference is the largest yet. It reflects macro-changes around cord-cutting and cord-nevering that have swept through the industry unabated and the rise of streaming and CTV.
The U.S. pay-TV business performed better than expected in Q3 ’20, with top providers “only” losing around 120K subscribers, according to data compiled by Leichtman Research Group. The results would have been even stronger if a portion of YouTube TV’s one million subscriber additions in 2020 are attributed to Q3 specifically.
Google didn’t break out how many of YouTube TV’s additions came in Q3, but given the return of major sports during the quarter, it’s probably fair to assume at least 500K-600K. Add those to Hulu + Live TV’s 700K additions in Q3 and just these two virtual pay-TV providers may have accounted for 1.2 to 1.3 million additions. That would be enough to more than offset the approximately 1.15 million subscriber losses that the largest cable, satellite and telco pay-TV providers incurred.
I’m pleased to present the 539th edition of the VideoNuze podcast, with my weekly partner Colin Dixon of nScreenMedia.
Despite gloomy predictions, the pay-TV industry in the U.S. turned in a relatively healthy third quarter in 2020, likely gaining subscribers. This was due to robust additions by virtual pay-TV providers (led by Hulu + Live TV and YouTube TV) and moderating losses by traditional providers (especially AT&T which had a huge loss in Q3 ’19).
Colin and I discuss how a big reason for Q3’s gains was the return of all major sports. Except for the NFL, major sports aren’t available in Q4. That means churn is likely to be up in Q4, though it could be offset by the pandemic keeping people indoors more.
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Large pay-TV providers lost a total of nearly 2.1 million video subscribers in Q1, according to data compiled by Leichtman Research Group. The 2.1 million is more than double the approximately 1 million video subscriber loss sustained in Q1 ’19 and a record for the industry.
No doubt Q1 reflected ongoing challenges the industry has faced for years: high pricing relative to SVOD services, subpar linear viewing experiences interrupted by too many ads, a proliferation of connected TV devices enabling myriad competitive OTT services to be viewed on the big screen, etc. But the tail end of Q1 also saw the first impacts of Covid-19: the loss of live sports which has been a pay-TV’s firewall for years and the economic crisis that’s leading to consumer belt-tightening.
Topics: Leichtman Research Group
Comcast shared a few data points that echoed other recent research, revealing that TV and streaming are up during the pandemic, and also that daily viewing patterns are blurring. Comcast said that since early March, daily viewership is up over 8 hours per week per household, or 14%, from approximately 57 hours per week per household to 66 hours per week per household.
Distribution of viewership has also changed. Comcast noted that whereas weekends are typically more popular days to watch TV, viewing has shifted to weekdays. In the past couple of weeks Monday viewing has surpassed Saturday viewing.
It’s too soon to know whether 2019 will be remembered as the turning point year for the pay-TV industry - when all of the negative trends coalesced into a perfect storm that permanently diminished the industry’s place in American homes. But I’d say the odds are likely that 10-20 years from now, 2019 will likely be the top candidate for “turning point year.”
For evidence, consider new data from Leichtman Research Group, finding that major pay-TV providers which account for 95% of the market, lost 4.9 million subscribers in 2019. If 100% of providers had been counted, the losses would have been 5 million or more.
This afternoon at 4pm ET, Comcast will host an Investor Meeting to share details about NBCUniversal’s upcoming Peacock streaming service. It is a session comparable to what Disney and Apple did last year for Disney+ and Apple TV+ respectively (and what AT&T/WarnerMedia will do for HBO Max). So we all get to learn all the official information about Peacock: pricing, availability, content, overall strategy/fit with existing businesses, marketing, etc.
Following the format of other investor days, we will hear from senior NBCU and Peacock executives, and likely someone from Comcast. Matt Strauss, an old friend of mine, who was moved over from Comcast to become Chairman of Peacock and NBCUniversal Digital Enterprises late last year, will no doubt be the maestro of this afternoon’s session. All the dribs and drabs of information that have been shared by the company previously will be reconciled with all of the rumors and speculation that have gurgled up from around the web.
Last Friday afternoon CNBC reported that NBCUniversal is “leaning toward” making the free, ad-supported version of Peacock, its upcoming streaming service, free, with everyone getting unrestricted access. This would be a change from restricting it to Comcast’s cable and broadband subscribers only, as originally intended. The ad-free version would still carry a fee.
Which direction Comcast decides to go will say a lot about whether it sees Peacock’s primary role as helping Comcast grow and defend its core cable/broadband business, or having NBCU become a bona fide competitor in the “streaming wars” developing with Netflix, Amazon, Disney, WarnerMedia, Apple, etc. How should Peacock’s value be optimized - by restricting access to serve the Comcast’s cable/broadband business, or to be guided by the market and help NBCU build Peacock into a large OTT business?
Yesterday Comcast made a smart move by converting its Xfinity Flex service to free for its broadband-only subscribers, eliminating the $5 per month charge that was in place since its launch this past March.
Colin and I discussed Flex on our podcast back then, and while we both liked its overall value, we found the $5 per month fee to be a head-scratcher. Paying the equivalent of $60 per year for a streaming device with 10K mostly older content titles seemed limiting as other companies were competing aggressively on price and streaming sticks could easily be bought for $30 or less.
Cord-cutting surged to a record in Q2 ’19, with pay-TV providers that account for 93% of the industry losing just over 1.5 million subscribers, according to Leichtman Research Group. The loss is up from 420K in Q2 ’18. As usual, satellite providers were responsible for the majority of the losses, with DirecTV losing 778K subscribers in the quarter and Dish losing 79K. The combined drop was nearly double the 480K lost in Q2 ’18.
The biggest seven cable TV operators lost a combined 455K subscribers in Q2 ’19 compared to a loss of 275K a year ago.
Topics: Leichtman Research Group
Comcast and Disney have announced a deal under which Comcast can effectively transition out of its 33% ownership stake in Hulu beginning in January 2024. The exit can occur at either Disney’s or Comcast’s instigation and at an assessed market value of Hulu that won’t be less than $27.5 billion. That means Comcast’s 33% stake could be worth approximately $9.1 billion though that could be reduced to a minimum of $5.8 billion if Comcast doesn’t fund any of Hulu’s capital needs between now and January 2024.
I’m pleased to present the 459th edition of the VideoNuze podcast, with my weekly partner Colin Dixon of nScreenMedia.
Comcast’s new Xfinity Flex is a little bit of a lot of things - access to certain SVOD, AVOD and live TV services, integration of certain connected home devices, a VOD library of 10K titles though unlikely anything very recent or super-popular, access to certain music services, though not market leaders Spotify or Apple Music and a grid guide. There’s also a connected TV device and voice remote powered by X1’s software.
Of course there are lots of alternatives for consumers to easily accomplish all of the above by themselves, challenging the value of a service like Flex. But to complicated things further, Comcast hopes to use Flex - which is targeted to broadband-only subscribers in Comcast’s footprint - to create upsell opportunities to Comcast’s multichannel video service and build value/reduce churn among broadband-only’s.
And that’s why, in an era when streaming sticks are being bought by millions of mainstream consumers for $30 or less, Comcast’s decision to charge Flex subscribers $5 per month makes the whole undertaking a head-scratcher.
In today’s podcast Colin and I dig into Flex and the various reasons it is unlikely to have much impact for Comcast. I’ve been writing for a while that Comcast does not seem to have an aggressive response to the massive changes sweeping through the industry. Today’s hyper-competitive, “land grab” video services market favors bold moves and Flex seems too tepid to stand out.
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Last week Charter, the second-largest U.S. cable TV operator, announced plans to launch “Spectrum TV Essentials,” a $15/month package of 60+ entertainment channels. According to Charter’s press release, Spectrum TV Essentials will be “made available exclusively in Charter’s footprint to Spectrum Internet customers who don’t already subscribe to Spectrum video services.” This means targeting broadband-only subscribers who have either cut the cord or never subscribed. It’s unclear how Charter will handle a prospect looking to downgrade from an existing multichannel TV bundle to Charter’s new skinny bundle (or “virtual pay-TV service,” as these bundles are often called).
Regardless, the way Spectrum TV Essentials is currently constructed/priced it is likely to have relatively narrow appeal and limited long-term value. It can be compared most to Philo TV, another inexpensive entertainment-only service. Charter has agreements with Viacom, Discovery, A&E, AMC and Hallmark to carry their networks, but NOT CBS, Disney, Fox, NBCUniversal or Turner, at least currently. So a ton of popular TV networks/programs will be missing, raising, once again the “Swiss cheese” problem of inexpensive skinny bundles that have too many holes in their programming lineups to have broad appeal. Such is the nature of striving to keep subscriber rates low; many expensive networks must be excluded.
I’m pleased to present the 448th edition of the VideoNuze podcast, with my weekly partner Colin Dixon of nScreenMedia.
Continuing our tradition for our final podcast of the year, this week Colin and I discuss the top 10 video stories of 2018 - at least in our humble opinions. Once again it has been a very active 12 months, with lots of innovation and change. Colin and I have had a great time analyzing and discussing the critical industry trends each week and we hope you’ve enjoyed listening to our thoughts in 2018.
Let us know what you think of our choices, whether you agree or disagree!
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Click here to listen to the podcast (37 minutes, 16 seconds)
I’m pleased to present the 445th edition of the VideoNuze podcast, with my weekly partner Colin Dixon of nScreenMedia.
On this week’s podcast Colin and I explore the pay-TV industry’s record high video subscriber losses sustained in Q3 ’18 (more here and here). The two big satellite services, DirecTV and Dish Network were major contributors. But perhaps more important was a dramatic slowdown in subscriber additions for the two biggest virtual pay-TV operators, Sling TV and DirecTV Now.
As we discuss, with these virtual services in flux and not stanching the bleeding of traditional multichannel TV, the critical underlying trends of cord-cutting and cord-nevering burst onto full display in Q3. Meanwhile, the strategies and success of virtual services like YouTube TV, Hulu Live and others is murky at best. All of this shows how unstable the pay-TV industry as a whole currently is.
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Last Thursday, Comcast reported a loss of 95K residential video subscribers in Q3 ’18, an improvement over the 134K it lost in Q3 ’17. Losing subscribers is never something to be celebrated, but amid the onslaught of skinny bundles, SVOD, cord-cutting, etc. the improvement was noteworthy (and certainly reflected the fact that AT&T slowed its promotion of DirecTV Now in Q3 ’18, which is why it gained just 63K skinny bundle subscribers, down from 323K a year ago).
For Comcast it was a welcome relief from Q2 ’18, in which it lost 140K video subscribers, over 4x the 34K it lost in Q2 ’17. On its Q2 earnings call, Comcast executives acknowledged that skinny bundles were taking their toll, and yet they did not seem to articulate an aggressive response. But Q2 ’18 also saw the addition of 260K residential broadband subscribers, up from 175K adds in Q2’17. Given how highly saturated the residential broadband market now is, this jump seemed surprising, and yet, it was barely explained on the Q2 earning call.
I’m pleased to present the 438th edition of the VideoNuze podcast, with my weekly partner Colin Dixon of nScreenMedia.
On this week’s podcast, Colin and I take up the question I explored on Wednesday, whether Comcast should divest its 30% stake in Hulu to Disney, as CNBC reported it is interested in doing. Colin and I discuss the many benefits Comcast derives from having a front row seat with 3 senior executives on Hulu’s board. On the other hand, there are many reasons why Comcast would be compelled to sell.
Meanwhile, as part of its acquisition of Sky, Comcast will also be inheriting Now TV, the innovative OTT service Sky runs. Colin shares his personal experience with Now TV and some of the specific things Comcast might learn and consider bringing to its U.S. operations. As always, rights are a central issue to surmount.
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In the wake of Comcast’s winning $39 billion bid to acquire Sky over the weekend, CNBC has reported that Comcast may be looking to swap its 30% ownership stake in Hulu (plus other consideration TBD), for Disney/Fox’s 39% ownership in Sky (a deal for Comcast to buy that was reported this morning). CNBC said that Comcast sees “only limited value in owning a non-controlling stake in Hulu” given Disney’s 60% share once the Fox deal closes.
This logic is understandable and in addition, divesting the stake would also relieve Comcast of partly funding Hulu’s losses (reportedly almost $1 billion in 2017). On the other side of the coin, Disney would own 90% of Hulu and give up its non-controlling stake in Sky as Comcast takes control of it.
Verizon has announced an aggressive, video-focused offer for its initial 5G launch, underscoring how potentially disruptive wireless telcos could be for both broadband and pay-TV services.
Starting tomorrow morning, residents of Houston, Indianapolis, Los Angeles and Sacramento will be able to visit “First on 5G” to determine whether Verizon 5G Home service is available in their area. If it is, then the service will become available beginning October 1st (though it’s not clear how quick activation would be). The introductory package is extremely compelling and includes:
Topics: Verizon Wireless
For all the talk about cord-cutting over the years, the most important trend in pay-TV these days isn’t consumers dropping out entirely, but rather shifting from traditional multichannel services to lower-priced virtual MVPDs or “skinny bundles.”
The trend of skinny bundle gains offsetting multichannel losses continued again in Q2 ’18 where, according to Leichtman Research Group, the top traditional services lost approximately 800K subscribers. But just the 2 publicly-reporting skinny bundles, Sling TV and DirecTV Now, gained 383K (with the latter accounting for 342K).